http://www.msnbc.msn.com/id/38800962

What happened to government by the people? This is a perfect example of inordinate corporate influence–actually, control– of important government regulatory roles that should –of course–be independent of those regulated. DV

With crisis shifting from response to recovery, focus will be on who’s to blame

BP employees and members of the U.S. Coast Guard in the command center at the Houma Joint Information Center listen to BP Chief Operating Officer Doug Suttles speak about the Deepwater Horizon oil spill in Houma, La., in June.\

By HARRY R. WEBER

* –
NEW ORLEANS – For months, the U.S. government talked with a boot-on-the-neck toughness about BP, with the president wondering aloud about whose butt to kick.

But privately, it worked hand-in-hand with the oil giant to cap the runaway Gulf well and chose to effectively be the company’s banker – allowing future drilling revenues to potentially be used as collateral for a victim compensation fund.

Now, with a new round of investigative hearings set to begin Monday on BP’s home turf and the disaster largely off the front pages, there’s worry BP PLC could get a slap on the wrist from its behind-the-scenes partner. That could trickle down to states hurt by the spill and hoping for large fines because they may share in the pie.

“I don’t think they’ve been as tough as they should have been from Day 1,” said Billy Nungesser, president of Lousiana’s hard-hit Plaquemines Parish. “We were at war. You don’t go to war and hope people respond.”

In the past few weeks, public messages from BP and the government have been almost in lockstep. The government even released a report – criticized by academic researchers and some lawmakers as too rosy – asserting that much of the oil released into the Gulf is gone, playing into BP’s message that its unprecedented response effort is working. A recent AP poll shows that BP’s image, which took a beating after the oil spill, is recovering.

Rep. Darrell Issa, R-Calif., said Thursday that White House support for the oil report shows the administration’s “pre-occupation with the public relations of the oil spill has superseded the realities on the ground.”

That differs from the atmosphere early on, when BP was the recipient of some very tough talk from the government. A little more than a week after President Barack Obama’s on-air comment about “whose ass to kick” in early June, BP executives encouraged White House officials at a meeting in Washington to back off on the rhetoric. They reminded the government that a bankrupt company pays no bills, according to a person who was briefed on the details of the meeting and spoke on condition of anonymity because of the sensitivity of the talks.

In mid-July, BP finally capped its runaway well and is now very close to sealing it from the bottom once and for all.

‘Trying to hide the football’
With the crisis shifting from response to recovery, the focus will be on who’s to blame and how much they should pay. The BP-government partnership raises questions about the government’s ability to be impartial in meting out punishment for the worst offshore oil spill in U.S. history.
Many of those investigating the spill are not independent.

“Whether the public accepts that remains to be seen,” said Wayne R. Andersen, a retired federal judge and the only nongovernment member of a key spill investigative panel.

The Deepwater Horizon joint investigation team that Andersen is on will hold its fourth set of hearings beginning Monday in Houston, where BP’s U.S. offices are located. The panel is charged with reaching conclusions about what happened.

Congress and the Justice Department also are investigating, and various government agencies will be determining how much BP and others should pay in fines for the April 20 explosion that killed 11 workers and spilled 206 million gallons of oil.

The amount of spilled oil alone could mean a fine of up to $21 billion if BP were found to have committed gross negligence, and criminal charges could be in order if negligence is found. The figure is important to the Gulf because Sen. Mary Landrieu, D-La., is pushing legislation that would require that at least 80 percent of the civil and criminal penalties charged to BP under the Clean Water Act be returned to the Gulf Coast for long-term economic and environmental recovery.

So if the government reaches a settlement with BP on fines that are significantly lower or, on the criminal side, lets them off easy, that could rub a lot of Americans the wrong way. By the same token, if the government comes down too hard on BP, that might hurt the government’s interests, because BP’s financial health and its ability to meet its spill obligations are tied together.

BP executives declined repeated requests for interviews for this story.

There are also other companies’ interests to consider: Transocean, the owner of the rig that exploded, and Anadarko Petroleum, a minority owner of the undersea well, will be looking to protect themselves by shifting blame to BP, while BP also will be looking to shift blame.
“They’re all trying to hide the football,” said Daniel Becnel, a Louisiana lawyer suing BP and others over the oil spill.

The ties that bind
The entire oil and gas industry will be watching closely to see if BP’s ace in the hole – its relationship with the federal government – pays off.

The ties that bind BP and the government together started forming soon after the rig explosion.
BP and U.S. Coast Guard employees sat side-by-side in a command center in Robert, La., coordinating the spill response and fielding calls together from media from around the world. That setup later moved to a high-rise office building in downtown New Orleans.

According to a person who has worked in the command center, the response team in New Orleans occupies two floors. Coast Guard and BP leaders each have a set of offices and work areas. The Bureau of Ocean Energy Management, Regulation, and Enforcement, formerly known as the Minerals Management Service, also has its own office, the person said. At the height of the spill, more than 400 people were on the two floors. Now, about 200 folks sit in those offices on any given day.

Often, the people from the BP leadership team would go into the Coast Guard offices with issues and vice versa, the person said.

BP and the government also worked together to control media access.

The Coast Guard and BP coordinated access for The Associated Press aboard the Helix Q4000 vessel in early August on the day of the so-called static kill operation, in which mud and later cement was pumped into the runaway well from the top. Accompanying the AP reporter and photographer on a BP-chartered helicopter to the vessel were six BP employees and a Coast Guard liaison. A photographer working for the White House also was aboard.

Retired Coast Guard Adm. Thad Allen, the government’s point man on the spill response, told the AP that the complexity of the response and technical know-how required made BP the natural partner.

“That may seem a little bit at odds and maybe not well understood by the American public or even some leaders, but it is in fact how we have been managing oil spills in this country for 20 years,” Allen said.

And, he said, the law dictated that the responsible party clean up the mess.

“You have to be able to tell them what you want, and they have to write a check,” Allen said. “It would be inadvisable to do that anywhere but sitting next to each other.”

‘Replace them with who?’

When asked if independent industry experts could have been brought in to work on the response instead of BP – knowing that the government would be investigating the oil giant – Allen quipped, “Replace them with who?”

Allen said the government doesn’t have the competence or capacity to deal with drilling a relief well and the type of technology it takes.

“Would you suggest I bring in a competitor?” Allen said. “One of the conundrums of this response is, and one of the things that I think is causing everybody some problems, is the federal government does not own the means of production to solve this problem at the wellhead.”
On the flip side, could independent investigators have been brought in to render judgment?

Andersen, the retired judge recently appointed to the joint Coast Guard-Bureau of Ocean Energy Management, Regulation, and Enforcement investigative panel, said that when you are dealing with a highly technical and narrow area of expertise, there is going to be overlap of the knowledge of the regulators and those they are regulating.

“Naturally, that needs to be out on the table,” Andersen said.

Special thanks to Richard Charter